Colleges' Latest Offer: Deals

Alma College President Jeff Abernathy says enticements are part of doing business nowadays.
Fabrizio Costantini for The Wall Street Journal

By

Douglas Belkin and

Melissa Korn

March 11, 2013 7:50 p.m. ET

A growing number of liberal-arts colleges are supplementing their traditional glossy brochures touting ivy-covered libraries and great-books seminars with more pecuniary pitches: Buy seven semesters, get one free. Apply today, get $2,500 cash back. Free classes after four years.

The schools are adjusting their marketing to attract students at a time when families are struggling to foot the bill for college—and increasingly concerned about the potential payoff. Some of the most aggressive offers come from the most financially vulnerable schools: midtier, private institutions that are heavily dependent on tuition and sit in regions with shrinking pools of college-bound high-school seniors.

ENLARGE

To show it is serious about students finishing in four years, Alma College in Alma, Mich., started this past fall promising free classes for those who need to stay longer—as about one in five Alma students typically do. Alma is publicizing the offer, along with a $2,500 stipend to pursue an internship or research project to attract students from outside the school's traditional central Michigan recruiting base, said President Jeff Abernathy.

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"We're 127 years old, but doing business the same way as we always have isn't going to work for the next 127 years," he said.

The pressure on liberal-arts schools is coming from several directions. Nationwide, the number of graduating high-school seniors this year is expected to decline to 3.32 million from a projected all-time high of 3.41 million during the 2010-11 school year, according to the Western Interstate Commission for Higher Education. And fewer college-bound seniors are choosing private four-year schools: Between 2006 and 2011, the percentage of students at those schools dropped to 20% from 22%, according to the College Board Advocacy and Policy Center.

For students headed to college, tuition is a bigger issue than ever. The average cost of public and private schools jumped 92% between 2001 and 2011, compared with a 27% rise in the consumer-price index. Last year the average amount that students at public colleges paid in tuition, after state and institutional grants and scholarships, climbed 8.3%, the biggest jump on record, according to the State Higher Education Executive Officers Association.

ENLARGE

Alma College's Mel Nyman, a professor of mathematics, instructs students at the Michigan school on a recent day.
Fabrizio Costantini for The Wall Street Journal

As a result, the average student-loan burden for 2011 graduates who had debt grew to $26,600, according to the Institute for College Access and Success, a nonprofit group focused on college affordability. That pressure means schools are having a harder time justifying price increases. In fiscal 2011, more than a third of private colleges and universities rated by Moody's Investors Service failed to post tuition revenue growth at or above the Federal Reserve's target 2% rate of inflation. In fiscal 2008, just 11% of private schools failed to meet that growth rate.

Many schools that can least afford it are offering inducements to attract more students. At least two dozen private colleges froze tuition this past fall, roughly double the previous year's total. Others are going further. Spring Arbor University in Michigan agreed in February to pick up a portion of the tab for future students who land low-paying jobs after graduation; that offer will apply to those working 30 hours a week and earning up to $37,000. Students who started last fall at Union College in Barbourville, Ky., will receive their eighth semester tuition-free if they maintain a 3.5 grade-point average.

Kayla Handy, a senior at Huntingdon Area High School in Huntingdon, Pa., said she would welcome such offers. The 18-year-old, who has applied to several private, liberal-arts colleges, worries she will graduate unable to pay her bills. "The idea of finishing with all that debt and no job is scary," Ms. Handy said.

Some schools also are wooing students—and trying to get out in front of new requirements by the Obama administration—by offering more information about where tuition dollars go. President Barack Obama has demanded more transparency on tuition and called for schools to provide data measuring student outcomes in areas including debt and employment. Mr. Obama said in his State of the Union address last month that schools whose outcomes don't pass muster would face squeezed access to federal loans.Administrators at Augustana College in Rock Island, Ill., posted a detailed ledger on its website last year of how they spend funds to address suspicion from prospective students and their parents that tuition dollars are wasted. The first words of the publication: "Yes, we've heard the critics."

Earlier

With total student-loan debt approaching the trillion-dollar mark, WSJ's Jason Bellini deconstructs how we got here and what it all means. Image: Getty

For the schools, such inducements are risky, requiring them to spend more of their already strained budgets to ensure they have enough students. Nebraska Wesleyan University last year began guaranteeing that if students maintain a certain grade-point average but still don't graduate in four years, they'll get the fifth year free. Only 55% of students there graduate in four years, according to federal data.

The Lincoln, Neb., school, which is affiliated with the United Methodist Church, also has expanded its recruiting area—north to Montana and east to St. Louis—after its freshman class unexpectedly shrank by 15% last year and retention dropped.

"It's white-knuckle time here," said Provost Judy Muyskens. The 126-year-old school has always had to be careful with money, "but this is different, it's trickier now," she said. "Family attitudes toward the value of a college education have changed. They're in a new world and so are we."

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